Quoine is a global cryptocurrency company looking to solve the liquidity problems that have surfaced with crypto investments. Quoine’s Liquid platform is a new breed of crypto exchange: thanks to a piece of tech called the World Book, FX currency conversions take place under the bonnet to ensure that all markets receive ample liquidity. This will eventually be extended to a global network of crypto exchanges.
Combined, this will produce a high level of liquidity — allowing any individual to access the opportunities and wealth the new crypto economy offers, while QASH is the native currency for services and benefits on Liquid.
Hi Mike. Thanks for joining me today. Can you tell us more about yourself and Quoine?
I started in a traditional Japanese conglomerate, and from there I went to Harvard business school. Once I was finished at Harvard, I joined a venture capitalist firm and worked up to being a junior partner.
I first found out about Bitcoin in 2010. This was a year after the Satoshi Whitepaper was released, and also a year after the global financial crisis. We learned that we need to protect our own assets. When I found out about Bitcoin, I was still a VC. I was working in Silicon Valley, and I was actively hunting for the next big thing.
2010 was the first big wave of Bitcoin. I was fascinated. I was trying to find a place to buy it, but there was nothing in the US that could facilitate.
I joined Softbank in 2011, and I moved back to Asia. I kind of forgot about crypto for a time, and then the second wave came. This was when Bitcoin first became worth more than $1,000. It was exploding in Asia, so I was committed to buying, but there wasn’t a good exchange in Asia at that time. That’s when I met Mario through a mutual friend. He was leaving his last position and was looking for something new, so we decided to build an exchange together.
Mario has a great history of building all kinds of different exchanges, and I said let’s do a crypto exchange, this is the future. I saw crypto as financial inclusion because everyone with a smartphone can access it. I knew that crypto was the future, so that was why we started Quoine.
What does a typical day in your life look like working with Quoine as well as working on the Liquid platform launch?
It changes based on the stage of where the company is. As you can imagine, my workload now is very different from what I did at the beginning of the company. When we were a team of 5–10 people, I would do so many different things, all the payments, transactions, withdrawals and deposits, translation, working on building the brand, so many different things. Mario was building the product.
During the second year, we had about 20 people, and we raised $20M. We raised $2M in an angel round, followed by an $18M VC round in 2016. That’s when I started becoming more of a CEO, fundraising, hiring, that sort of thing. We eventually became a licensed and regulated exchange with 300 employees, so now I have to manage the company.
I make sure we share the same visions, missions and values. I need there to be a true north where we are all facing.
I have to make sure the CxOs and all managers are organized, and that we are functional. I make sure we are all on the same page.
What would you change about cryptocurrency that would have a very positive long term result?
I would make it a level playing field. When you are an exchange, whether you are centralized or decentralized, it doesn’t matter. If you operate an exchange, you collect fees, and you are subject to regulation. Especially if you become large and you are processing billions of dollars for your customers, the regulators won’t leave you alone.
What crypto needs is proper regulation. I don’t want over- or under-regulation, I just want a consistent, global standard.
At the moment there are a lot of offshore exchanges, and they don’t handle security properly. You have to ask yourself: do they do proper fund segregation? Do they follow best practices? Some exchanges do wash trades and there is always manipulation. It’s not a level playing field at the moment.
I don’t like how the customers don’t understand this until something happens to their assets. Crypto will be more regulated, and this will be great for the average customer. Japan is the first economic powerhouse to regulate crypto, and I know others will follow. Like it or not, crypto will be regulated.
What exactly is Liquid and what does it do?
We are in a place where the markets are not liquid enough to purchase crypto with some of the top fiat currencies, which shouldn’t be the case. This is because there are not enough buyers and sellers to have a liquid enough market. This is where Liquid comes in.
Our World Book can match trades that have the same base currency, but the fiat quote currency is different. We convert the fiat behind the scenes in real time.
These FX conversions mean our customers are not limited by only trading with people who want to buy and sell in their quote currency. This version of the World Book is fiat-currency agnostic. In phase one of the World Book, the base currency has to be the same.
The first phase of the World Book is online now on Liquid, and it is live for fiat pairs with BTC, BCH, and ETH. Phase two of the world book is crypto agnostic. In phase two you can buy BTC in Euros and your trade could be matched with someone selling ETH in JPY. This brings true liquidity.
Liquidity in crypto is fine now if you are only interested in Bitcoin, but if you are interested in all the 2,000 or so tokens out there, the liquidity gets low after the top 10. We aim to change this by aggregating orders into one order book.
For financial industries, liquidity is so important. Without it it can lead to a financial crisis.
In todays market with all the progress made, why do you think there is a gap for the Liquid platform and the World Book engine to fill?
I believe in a token ecosystem or the token economy. I believe everything will be tokenized, for example, rewards cards. This is going to happen more and more in the future. For this to happen, there needs to be a platform where a person can come and they know they are getting the best rate. For this, excellent liquidity is required. People will know that if they come to us they will find the best liquidity. You can sell or buy the token for the price you want. That’s what we are trying to achieve.
In 2018 there’s been a trend of exchanges being hacked that has affected the entire crypto industry, tell us more about the security measures Quoine are taking to ensure confidence when using Liquid
I look at security as an incurable disease. In 2004 Bill Gates said that spam will go away within two years. He was clearly wrong and it’s more of an issue than ever. I look at security in the same way as spam: it’s cat and mouse. Security will always be an issue, it can’t be avoided.
When you look at these services, breaches happen when things are online. They are not often physical breaches. That means that your customer assets need to be stored in a safe and secure way. The only way right now to achieve this is offline storage. Of course, cryptocurrency utility diminishes when the whole purpose of having a digital currency is having it ready in real time. But we are an exchange, people deposit, buy, sell, and trade the crypto tokens that they want.
The wait for the funds is worthwhile when we offer a safe and secure service. We are the only exchange that does 100% cold wallet storage. Additionally, we are working hard to improve our withdrawal times with new technologies.
The challenge of crypto is that security hacks happen everywhere. We cannot keep things online because of this. With crypto hacks, you are not just losing personal information, you are losing your private keys and your assets.
Can you tell us more about Quoine’s new ICO platform that will be ready after the Liquid platform launch? What benefits do QASH holders have with future token sales that Quoine will help launch?
The ICO market is challenging right now. There are a lot of fake ICOs, uncredible token issuers and scams out there. The biggest reason why that is happening is that anyone can host an ICO without any real due diligence being done. Right now, you can do an ICO just by having a LinkedIn profile and a white paper.
It is becoming increasingly difficult to do a successful ICO. In the US, doing an IPO you go through either the New York Stock Exchange or NASDAQ. I think ICOs must go through exchanges. Right now, you have to do so many things when you host an ICO yourself. They need to go through exchanges so regulators can make sure the exchange is regulated, and everything is good. In the US, every ICO is a security. That means an exchange needs a brokerage license.
Our ICO platform is an end-to-end solution, a one-stop shop where a token issuer can do a private or public sale with an immediate listing available. We will offer both fiat and crypto. A soft cap mechanism is coming very soon, too.
We want to set the standard and become the default platform for anyone who is interested in crypto and ICOs.
Can you tell us some of the goals you’re looking forward to accomplishing the most with Liquid in the next year?
I have many, many goals. We want to make crypto mainstream. What does that mean? Firstly, get institutional investors onboard for a nice mix with retail investors.
Wall Street will only come into crypto when the industry is safely regulated and their assets are properly custodialized or segregated. That’s not the case right now.
My next goal is working more closely with regulators and expanding globally. Increasing liquidity is part of this.
(Disclaimer: Author holds investments in QASH.)